A year after announcing its strategic plan, Société Générale still arouses distrust. Despite the efforts of its CEO Slawomir Krupa, the bank has failed to convince investors.
For the past year, Slawomir Krupa has not been idle. The CEO of Société Générale has been making a series of sales. In particular, he has sold around ten subsidiaries in Africa, including Morocco, two private banking subsidiaries in Switzerland and Great Britain, as well as a subsidiary specializing in leasing. The amount of these sales already amounts to nearly 3 billion euros, enough to free up capital.
As promised, the CEO also did not hesitate to cut costs, announcing the elimination of around 950 positions at headquarters, or nearly 5% of the workforce. Nothing has changed. Over the course of a year, the bank has lost 15% on the stock market while the DJ Stoxx Banks, the benchmark index for the European banking sector, has climbed 30%. Why such distrust and why can’t Slawomir Krupa reverse the trend?
Too heavy a legacy
“The legacy he was left was a bit heavy,” says a former executive of Société Générale. Slawomir Krupa continues to pay a high price for the recent choices of the former management.
In 2022, Société Générale made a very bad bet by taking out hedges against a drop in interest rates. A mistake that has already cost it more than 2 billion euros. Enough to force it to revise downwards one of its financial objectives for retail banking.
The “black cat” of the markets
In this context, it is difficult to restore the image of a bad student that has stuck to the bank for years because of all the setbacks it has accumulated: Kerviel, subprimes, the Libor affair and even Russia’s emergency exit after the outbreak of the Ukrainian crisis.
“Société Générale is the black cat. It has almost become a joke among traders. Every time we get a little enthusiastic and decide to buy, something happens to it,” sums up one analyst.
Alain Bokobza, Head of Global Asset Allocation at Société Générale CIB – 13/09
A complicated business model
It must be said that the difficulties are real. According to a rival banker, who would not have wanted Slawomir Krupa’s job for anything in the world, “Société Générale has one of the most complicated business models of all European banks.”
In retail banking, it is both too small to rely solely on a high-end clientele like BNP Paribas and too big to compete with mutualists. In market activities, it remains powerful and has no interest in cutting into these activities so as not to restrict this engine.
“But suddenly when there is an accident on the markets, she is on the front line,” explains a banker.
Finally, the former boss, Frédéric Oudéa, tried to find a new source of growth in car leasing by buying Leaseplan… but in the opinion of many analysts, this acquisition of almost 5 billion euros cost far too much and it will take time to make it profitable.
A plan that doesn’t make you dream
In this context, no doubt aware that he could not perform miracles, Slawomir Krupa opted a year ago for a realistic plan but one which was therefore judged to be unambitious by the markets.
An analyst sums up: “even if it meets its objectives across the board, Société Générale is not a dream come true.”
The turnaround will take time and investors, scalded by years of bad news, are waiting to judge the outcome.
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